Phoenix Industrial Development Remains High-Paced
Phoenix continues to lead the nation in terms of industrial development, despite a slowdown in construction starts. At the end of October, the metro had 24.7 million square feet of industrial space under construction across 95 projects. Nevertheless, construction starts for industrial projects have decreased sharply since the same period last year.
When it comes to sales, the Phoenix industrial market is thriving, with nearly $2.2 billion in transactions recorded year-to-date through October. The average price per square foot stood at $162, with over 15 million square feet of industrial space changing hands.
A slowdown in construction starts
At the end of October, Phoenix had 24.7 million square feet of industrial space under construction across 95 projects. The pipeline accounted for 5.9 percent of existing stock, significantly surpassing the national average of 1.8 percent.
Among peer markets, Kansas City (4.1 percent) also recorded higher numbers than the national average, while New Jersey (1 percent), Indianapolis (1.1 percent) and the Inland Empire (1.5 percent) had the lower numbers.
In the first 10 months of the year 10.7 million square feet of space broke ground in the metro across 55 properties, showing a significant decrease compared to an average of 32.5 million square feet annually over the previous three years. This represents 2.4 percent of total stock, higher than the 0.9 percent national average, according to CommercialEdge data.
Taiwan Semiconductor Manufacturing Co.’s 3.8-million-square-foot project remains the largest industrial property under construction within the metro. Spanning 805 acres at 5088 W. Innovation Circle—within the metro’s North Gateway submarket—the facility will be the most advanced semiconductor fabrication plant in the country. TSMC’s project, expected to be completed in the beginning of next year, is supported by $6.6 billion in direct U.S. funding provided under the CHIPS and Science Act.
Lincoln Property Co.’s 1.3 million-square-foot Building C at the Luke Field campus in Glendale ranks fifth among the metro’s largest industrial projects under construction. Totaling 2.4 million square feet, the $515 million Class A industrial project will also include the 695,750-square-foot Building A and the 454,761-square-foot Building B.
Still leading industrial development
Year-to-date through October, 142 projects totaling almost 29 million square feet of industrial space came online in Phoenix. Deliveries accounted for 6.9 percent of the market’s total stock, much higher than the national average of 1.6 percent.
Pheonix ranked first, with Dallas (27 million square feet) following closely. Metros such as New Jersey (7.8 million square feet), Atlanta (7 million square feet) and Indianapolis (6.1 million square feet) lagged behind.
Prologis has completed the 1.2 million-square-foot Building 1 at Prologis 303 Business Park in Goodyear, Ariz. At full build-out, the 113-acre campus will comprise two buildings totaling some 1.6 million square feet. Continuing to expand its presence in Phoenix, Amazon signed a 1.2-million-square-foot lease at the facility, committing to a 10-year tenancy.
Ross Stores has delivered Ross Distribution Center, a 1.7 million-square-foot distribution hub in Buckeye. Covering 125 acres at 23255 W. Southern Ave., the site is near Interstate 10, at the intersection of Southern Avenue and Watson Road. The developer purchased the site back in 2022 for $28.3 million.
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Industrial deal volume increased in Phoenix
Phoenix’s industrial sector registered almost $2.2 billion in sales year-to-date through October, surpassing the $1.6 billion recorded at this point in 2023. Involving 171 properties, more than 15 million square feet of industrial space changed hands across the metro, according to CommercialEdge data. Assets traded at an average price of $162 per square foot.
Among peer markets, The Inland Empire ($263 per square foot) and New Jersey ($218 per square foot) were the priciest metros and surpassed the national average of $113 per square foot, while Indianapolis ($70 per square foot) and Kansas City ($40 per square foot) recorded the lowest average sale prices nationwide.
Cohen Asset Management has recently sold a 400,000-square-foot Class A cross-dock industrial building in Phoenix for $69.6 million. Karney Properties purchased the facility located at 7200 W. Buckeye Road. The Home Depot fully leases the property and uses it as a return center.
Phoenix industrial vacancy grows year-over-year
Phoenix’ industrial vacancy rate at the end of October reached 6.4 percent, lower than the national average of 7.2 percent, but much higher than the 2.4 percent recorded in the metro in October 2023. Other markets with vacancy rates above the national average were Indianapolis (9.1 percent), Dallas (8.3 percent), New Jersey (7.8 percent) and the Inland Empire (7.3 percent).
Gateway Classic Cars has recently signed to become Greystar’s first tenant at the Class A three-building Caliber by Greystar industrial development in Peoria, Ariz. The company will occupy 43,809 square feet in Caliber’s 122,863-square-foot Building B.
Additionally, GTI signed a full-building lease for a 530,307-square-foot facility at Lakin Park in Goodyear, as part of its expansion in the Phoenix industrial market. The newly completed building at 17505 W. MC 85, within the 400-acre master-planned logistics campus, will be used for light manufacturing and battery casings assembly.
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